Business Laws and regulation

TWO KINDS OF PERSONS

1. Natural
> human beings
> personality upon birth

2. Juridical/Artificial
> not human but given personality by law
> they are considered persons because of the principle
“legal fiction”

BUSINESS ORGANIZATION

Partnership & Corporation

(Acquire personality: Legal fiction)

Example:
Bobet – Boyet – Binoy – Bitoy – Budoy – B Inc
> 6 persons
> even though they are partners they are not owners because B.
Inc is distinct and separate
> they may have rights, but they are not owners
> B can be a partner because it is a person.

PARTNERSHIP
> Book V, civil code – special contracts
> a contract (provided by law)
> ARTICLE 1767: By the contract of partnership, two or more
persons bind themselves to contribute money, property or
industry to a common fund, with the intention of dividing the
profits among themselves.
Two or more persons may form a partnership for the exercise
of a profession
> Birth of partnership: valid contract

Partners – organize – contract – personality – distinct & separate

ELEMENTS OF CONTRACT
1. cause
2. consent
3. object
KINDS OF CONTRACT

1. Consensual – Real
> CONSENSUAL – perfected upon consent (certain offer
and absolute acceptance)
> REAL – perfected upon delivery (e.g. contract of pledge)

2. Onerous – Gratuitous
> ONEROUS – burdensome
> GRATUITIOUS – for free

3. Bilateral – Unilateral
> BILATERAL – all parties have an obligation
> UNILATERAL – only one party has obligation (e.g.
donation)

4. Principal – Accessory
> PRINCIPAL/PRIMARY – can stand alone
> ACCESSORY/SECONDARY – can’t stand alone
> (SUBSIDIARY LIABILITY)

5. Nominate – Innominate
> NOMINATE – with names
> INNOMINATE – without names (e.g. do ut des, do ut
facias, facio ut des, facio ut facias)

ELEMENTS OF A PARTNERSHIP

1. VALID CONTRACT
 Binding (law, morality, public policy)
 Consent (certain offer and absolute acceptance)
 Vitiated (error, threat, mistake, violence)

2. CONTRIBUTION OF PARTNERS
 Money (can be foreign currency but can also be refused
because of legal tender)
 Property (real, personal, tangible, intangible)
 Industry (skills, work, expertise)

3. COMMON FUND
  Capital – do business – PROFIT

4. PROFIT

EXERCISE OF PROFESSION
 Accounting firm
 Law firm
 Engineering firm
(partnership can be not because of profit but profession)

ACTIVITY EXAMPLES

Bobet and Boyet

(Upon death of parent inherited apartment with
an income of Php 30k)

Partnership or not?

- No because there is no valid contract of partnership

- No because there is no profit, its not a business
- No because no contribution, its an inheritance

Nonoy and Nenang

(legally married, share properties and its profits)

Partnership or not?

- No because they are not partners under Article 1767.

They are partners under the contract of marriage

PROPERTY RELATIONSHIP BETWEEN HUSBAND AND WIFE

1. Absolute Community
 All properties acquired before and during marriage will be
owned together

2. Complete Separation
  All properties acquired before and during marriage will be
owned separately

3. Conjugal Partnership
 Properties acquired before marriage will be owned
separately and properties acquired during marriage will be
owned together.

Capital Owned by husband

only
Paraphernal Owned by wife only
Conjugal Owned by Both

 What will govern the spouses?

Pre-Nuptial Agreement (agreement before marriage)

 When there is a contribution of profit there is a

PRESUMPTION

KINDS OF PRESUMPTION

1. Conclusive
 Very certain, Sure of conclusion

2. Prima-Facie
 Not sure, rebuttable

KINDS OF PARTNERSHIP

1. Universal
 Partners contribute ALL their properties or ALL income of
ALL its partnership.

The income of all the properties belongs to the partnership

because of the principle:
Accessory will always follow the principal

2. Particulars
  Partners contribute ONE/SOME of their properties or the
income of ONE/SOME of their properties

 Can husband and wife form a partnership?

Yes, they can if the partnership is particulars not
universal.
PROPERTY RELATIONSHIP: Absolute Community
Example:

Bobet and Boyet contributes both their only properties to form B

Incorporated

Kind of partnership: UNIVERSAL

After the partnership is formed Bobet acquired a farm and Boyet

a Land

Who owns the new properties? OWNERS

(unless there is an agreement that all properties acquired even after the
partnership is formed will be owned by the partnership)

 Inheritance and Donation – partners retained ownership

 Fruits and Income – partnership

Partners Person in the entity

Partnership Is the entity

KINDS OF PARTNERS

 CONTRIBUTION
1. Capitalist – contribute money or property
2. Industrial – contribute industry
(capitalist and industrial – contribute money, property and
industry)

 LIABILITY
1. General – liable beyond their contribution
2. Limited – liable up to the extent of their contribution

To be liable:
 - Principal/Primary
- Secondary/ Subsidiary

 MANAGEMENT
1. Managing – participates in the management of the
partnership and can represent the partnership
2. Silent – don’t participate in the management
Partnership can’t manage itself. It needs a natural person to
manage it.

 PARTNERS IN RELATION TO THE THIRD PERSON

(Someone who are not partners and the partnership)
1. Secret – not known as a partner
2. Ostensible – not known as a partner
3. Partner by estoppel – not really a partner but by
presentation others will believe that he/she is a partner.

Not a part of contract but the law will protect the interest of a
person in good faith

Corporation cannot be a partner

TWO WAYS OF ENTERING A CONTRACT

 Oral
 Written

Are formalities necessary in a contract of partnership?

No formalities necessary, it can be oral or written.

EXCEPT: (cannot be oral)

1. Immovable property/Real (kind of partner: capitalist)

 Written in a public instrument, “contract of partnership”
 Considered when its notarized
 Registered in the register of deeds.
 Cannot be oral because there is a transfer of ownership
 2. Php 3k or more
 Contract of partnership in a public instrument
 No transfer of ownership
 Registered in Securities and Exchange Commission

3. Limited Partnership
 Certificate of Limited Partnership
 Duly recorded by SEC
 General partnership – all general partners
 Limited partnership – at least one general partner and the
rest are limited.
 It should be written so that the third person will know
who are the persons who are not liable (limited partners)

Example:

Bobet and Boyet both contributed Php 1,000 each to form B Inc
(orally)

B Inc has a profit of 1M

Is there a need for a written contract?

NO, there is already a valid contract of partnership

 Contribute money (to give), property (to give) and

industry
 Specific property:
- Preserve the object
- Deliver the object
- Deliver the fruits and object

APPLICATION OF PAYMENT

1. If there is a receipt issued in the name of the partnership,

the entire amount will be owned by the partnership
2. If there is a receipt issued named after the managing
partner the payment would be divided proportionately.
3. If there is no receipt issued the payment would be divided
proportionately.
  In a partnership, no partner is forced/compelled to sell a
share.
 No involuntary buying out allowed because a partnership
is an agreement.
Exception: If the partnership needs a new contribution or
capital and a partner doesn’t want to contribute the
additional capital needed.

Purpose of partnership? PROFIT

DISTRIBUTION OF PROFIT
How will they divide?

1. Based on agreement (because partnership is a contract)

 Not allowed: to exclude a partner from profit sharing (it is
against the principle of partnership)